The rise of Asian-owned foreign banks and credit stability in Asia

There has been a surge of foreign bank entry into Asian countries since the Asian Financial Crisis (AFC) in 1997-98 that has important welfare effects. On one hand, foreign ownership has the potential for, and has started to show evidence of, improving overall banking efficiency and modernizing banking industries in Asia (Gopalan and Rajan, 2009; Jeon et al., 2011; Xu, 2011); on the other hand, foreign bank entry raises serious and legitimate concerns about its implications for local credit stability, especially during crisis periods.